Technical Notes 2021, Issue 172 - Shared Equity Schemes in East Dunbartonshire

1. The purpose of this technical note is to update Members on shared equity schemes operated by Scottish Government and East Dunbartonshire Council and to highlight key similarities and differences in both schemes.
    
2. Shared equity schemes provide financial assistance to people on moderate incomes who cannot afford the full purchase price of a home by allowing purchasers to buy homes at a price significantly below the market value by purchasing a share of the property, with either the Council or Scottish Government retaining the balance of the shares.
    
3. Residents in East Dunbartonshire have the opportunity to access two shared equity schemes – the New Supply Shared Equity Scheme (NSSE), administered by Scottish Government and the Shared Equity for Sale Scheme (SESS), administered by East Dunbartonshire Council.

Scottish Government – New Supply Shared Equity Scheme (NSSE)

4. The Scottish Government operates the New Supply Shared Equity Scheme (NSSE) which helps people buy new-build homes owned by housing associations and local authorities. Applicants fund between 60% and 80% of the purchase price through a combination of mortgage and deposit.   The Scottish Government hold the remaining share under a shared equity agreement until the owner decides to either buy out the Scottish Government’s share or sell the property.
    
5. The NSSE scheme is available to the following priority groups:

• First time buyers
• People aged 60 and over
• Social renters (people who rent from the council or a housing association)
• Disabled people
• Members of the armed forces
• Veterans who have left the armed forces within the past two years
• Widows, widowers and other partners of service personnel for up to two years after their partner lost their life while serving
• People who have previously owned a home and have experienced a significant change in circumstances – for example, a marital breakdown.

6. Once purchased, homeowners will generally be able to increase their equity share to 100% if they choose to do so, meaning that they have full ownership of their home.  In these circumstances, the Scottish Government no longer has a share in the property and will not be due a receipt following any future sale.

East Dunbartonshire Council - Shared Equity for Sale Scheme (SESS)

7. The Council has its own version of the NSSE scheme, known as Shared Equity Supply Scheme (SESS), relating to properties either built by the Council or acquired from a Housing Developer through the Council’s Affordable Housing Programme.
    
8. The Council’s scheme is based on the same principles as NSSE, however SESS does not receive grant funding. The discount is generally achieved on the differential between the agreed purchase price and the market value. Properties should be sold at least 20% below the market value to be affordable to lower income households. 
    
9. Additionally some of the eligibility criteria vary to NSSE.  SESS eligibility is detailed below:

• People who are homeless or threatened with homelessness and have had a homelessness assessment carried out by the Council
• First time buyers
• People with a disability whose current home doesn't suit their needs
• Residents living in housing that is Below Tolerable Standard
• People leaving the armed forces or veterans
• People who have experienced a significant change in their circumstances, such as separating households or are subject to mortgage stress.

10. It should also be noted that as part of the eligibility criteria the maximum mortgage to income ratio is x3.5 times gross annual income for a single person household, and 3 times gross annual income for a non single person household.  The maximum annual income is detailed below by Housing Market Area.

In those circumstances where a single income is being used to apply for a multi-person household with non-earning dependents (in particular for children), the upper maximum threshold will also be considered.

11. A further difference with SESS is that homeowners can only purchase a maximum of 80% stake in the property.  The Council will always retain a ‘Golden Share’ of 20% which ensures that the property remains in perpetuity.  The Council also has a pre-emption right which means that if the owner decides to sell then the Council can purchase the property for the valuation price if they wish to do so.   The Council can resell the property on a shared equity basis, or convert the property to social rent if required to meet housing need.   Alternatively The Council can choose to allow the owner to sell the property on the private market and recoup its equity stake to be invested in other forms of affordable housing.
     
12. To date the Council has sold 32 properties under the SESS scheme, and expect to sell a further 17 new shared equity homes over the next few months.  All applicants who have purchased were on the Council’s housing list. The Council will continue to promote SESS in current and future housing developments as an affordable housing tenure.
     
13. Further information on the Scottish Government NSSE Scheme can be found on the Government website [opens in a new window].
     
14. Detail on the Council’s SESS Scheme is available on the Shared Equity page.